Coal news and updates

Coal Production Drops with Fall in Electricity Generation in The USA

Coal shipments

According to EIA (U.S. Energy Information Administration) estimates, US coal shipments fell to 14.15 million tons during the week ended July 3. This compares with 15.52 million tons for the week ended June 26. Out of the total shipments, 5.80 million tons came from the East, while the remaining 8.35 million tons came from the West.

The shipments correspond to 82,924 railcar loadings. The fall in electricity generation and weak natural gas prices hampered coal shipments during the week.

Why is this indicator important?

Every week, the EIA publishes shipments based on coal railcar loadings. Coal is an important commodity for railroad companies that ship coal such as Union Pacific (UNP) and CSX (CSX). However, coal’s importance in freight is falling due to the emergence of shale oil. It’s also falling because of competition from other commodities. We looked at crude oil and coal in the third part of this series.

More importantly, coal producers mine coal on demand. So coal shipments mirror production over the long term. A sustained rise or fall in coal shipments over a few weeks compared to the previous year is a significant indicator for coal producers (KOL) like Peabody Energy (BTU), Alliance Resource Partners (ARLP), Arch Coal (ACI), and Cloud Peak Energy (CLD).

However, there can be some deviations in the short term. Shipments are a function of demand and other factors such as rail availability and competition from other commodities. So weekly coal shipment data can be misleading. Apart from genuine demand-side issues, factors like the unavailability of railcars, bad weather, and supply issues can distort the data.

source: http://marketrealist.com